New Mexico’s oil and gas industry is inadequately bonded to the tune of $8.1 billion. According to a study released today by the Center for Applied Research, $8.1 billion will be needed to fill the gaps where existing financial bonds won’t cover the cost to fully clean up and remediate over 60,000 wells, 35,000 miles of pipeline, and other miscellaneous infrastructure. A little over a year ago I wrote an op-ed that was published in this paper, warning that New Mexico wasn’t financially equipped to restore our lands when the oil and gas industry next faltered.
At that time, I was urging public support of House Memorial 29, which sought an in-depth study to determine the statewide inadequacies in our bonding requirements for the industry. We drastically needed this information. If the bottom fell out, like it has done before, and companies went bankrupt as a result, the responsibility to clean it up would fall on you, as taxpayers, and on the State Land Office that I oversee, an agency that exists to raise money to support our public schools. It is my belief, and I hope you share it, that neither you nor our schools should be on the hook to foot this massive bill. A month after I wrote that op-ed, the reality I warned of was on our doorstep with the onset of the COVID-19 pandemic. Oil and gas prices fell to negative numbers, demand evaporated overnight, and there was nowhere to store excess product.
Luckily for now, the industry has stabilized, but we still need answers to these long-term questions. With the support of a huge amount of data provided by my staff at the State Land Office, along with Gov. Michelle Lujan Grisham and her staff at the Oil Conservation Division and industry, the study we sought was independently commissioned by the Center for Applied Research.
The findings require our full attention, participation and action as a state. Enormous sums of taxpayer money, and the long-term health of our lands, are on the line. The study tells us what the reality could be, and we certainly aren’t alone as the federal government and neighboring states like Colorado work to identify their own bonding inadequacies. We face an $8.1 billion bill we can’t afford.
In addition to financial ramifications, we all have a responsibility to the land. When operators are done with their leases, we require that they plug wells so that gas and methane don’t leak into our air. We require removal and cleanup of old infrastructure and remediating spills and contamination. And finally, we ask that they reseed the land to restore it to its original state. No one can afford these obligations if they have gone bankrupt, so we need companies to be adequately bonded on the front end.
I am committed to ensuring we get there, but how we do it depends on all of us. In order to get the full picture of how our decisions will impact the public, our working families and small businesses in our state, we will hold a significant number of public meetings, not only in impacted communities, but across the state. We hope you will join us, read the full report and follow along with our public engagement process at https://www.nmstatelands.org/bonding.